Amazon

Friday, June 16, 2017

SPX and RUT: A Bit More Hope for Bears?

I've been staring at the RUT chart on and off for the past few months, and a couple months ago, I suggested the possibility of an ending diagonal -- but the pattern hasn't quite shaken out properly for the version of the diagonal that I first proposed. The key issue with this pattern is that it seems to be a series of 3-wave rallies, which is proper for a diagonal, and last night it dawned on me that there's another way to look at this structure that fits the rules for an ending diagonal terminal pattern (below):

The nice thing about this structure is that it also provides an invalidation level at 1442 -- sustained trade north of that level would at least provide the option of a strong rally. Frankly, that's one of the reasons I suspect this is a diagonal -- because if this is a bull warm-up pattern, then it would be outrageously bullish, and I have a hard time seeing that type of moon-shot from the market's current position.

This is somewhat akin to the way I felt back in 2015 shortly before the flash-crash -- when many technicians were suggesting a nested third wave rally was about to launch to the moon, but I was calling a top. We're in a similar position now.

If we compare the RUT pattern above with the preferred count I've been publishing in BKX, then we may have two markets well-aligned for a bearish move:

In conclusion, my instinct for a while has been that the market is undergoing a topping process, and with this fresh look at RUT, there finally seems to be some confirmation from the charts. If RUT breaks out solidly over 1442, then something more bullish may be afoot, but until then, I will continue to lean bearish. Trade safe.

Free Copies of Each Post by Email

Real-Time Streaming Quotes

Pretzel's Amazon Store

Pageviews

Disclaimer: The content on this site is provided as general information only and should not be taken as investment advice. All site content, including, but not limited to: forum comments by the author or other posters, articles and charts, advertisements, and everything else on this site, shall not be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The author may or may not have a position in any company or advertiser referenced above. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult your investment advisor before making any investment decisions.